Kindred wins court battle as voting starts today on sale to Humana, equity partners

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Judge gives Kindred victory, lengthens time for vote
Judge gives Kindred victory, lengthens time for vote

A Delaware court has ruled in Kindred Healthcare's favor, rejecting a lawsuit by a large shareholder on the eve of a scheduled vote on the company's three-way sale.

Investor Brigade Capital Management had argued that inadequate disclosures of a director's conflicts should postpone the sale to Humana and two equity partners. The company asked the Court of Chancery of the State of Delaware to award a preliminary injunction.

That request was rejected Tuesday.

The proposed $4.1 billion deal was announced in December, and Kindred shareholders will start voting today to approve or reject the merger.

But Vice Chancellor Sam Glasscock III on Tuesday also directed Kindred to delay the vote by five business days or keep it open for that length of time. The company has elected the latter option, meaning results won't be tallied until April 5.

If the deal is approved, Kindred's home health, hospice and community care businesses will spin into a standalone company called Kindred at Home. Ownership will be split 40/60 between Humana and the equity firms TPG Capital and Welsh, Carson, Anderson & Stowe.

The company's long-term acute-care hospitals, rehabilitation centers and contract rehabilitation services will operate as a specialty hospital company owned by TPG and WCAS. It will carry the Kindred Healthcare name.

There was dissension among shareholders when news of the Humana deal broke. In a December letter to Kindred's President and CEO Benjamin Breier, Brigade Capital said the deal price of $9 per share was “not reflective of Kindred's intrinsic value and will shortchange existing shareholders.” Brigade owned more than 5% of the company's stock when the deal proposal was announced. Brigade vowed to vote against the sale.

But two proxy advisory firms have recommended stockholders vote for the transaction, noting that “now is the right time” given challenging operating, reimbursement and regulatory environments.

Ventas Inc., which owns 30 long-term acute care and inpatient rehabilitation facilities operated by Kindred, also came out in favor of the transaction.